Freelance Writers and Taxes: Knowing the Important Facts

You're an independent contractor. You're on your own with tax withholdings. But you don't have to be alone when it comes to tax preparations.

Knowledge and preparation go a long way toward filing taxes as a freelancer. So, let's get you headed in the right direction.

If you don't remember anything else, here's the most important tips to remember as a first-time remote writer preparing taxes:

  1. Keep track of all clients you've worked for;

  2. Be honest about your earnings;

  3. Make estimated tax payments each quarter (to stay organized...and possible gain a refund).

But, let's make sure that you truly understand what those forms represent AND how to ease the fear—and pain—of filing this year.

What's the Difference Between a W-2 Form and a 1099 Form?

When you are employed at a company based in the United States, you receive Form W-2 each year. This is an official Internal Revenue Service (IRS) form issued to you for income tax filing purposes. A W-2 form includes information about the taxes that were withheld from your paychecks throughout the year. It also includes the total amount of gross earnings you made during the year.

But, you do not receive a W-2 form when you are a self-employed freelancer or independent contractor. Instead, you receive a Form 1099-MISC, provided that you earned at least $600 for the entire year.

You will receive a physical copy of your 1099 form via the United States Postal Service by January 31.

Unlike a W-2 form, you are not required to submit your 1099 form to the IRS. However, the nonemployee compensation found in Box 7 of your 1099 form is still reported to the IRS. Note that you are responsible for paying taxes on all earnings—even if you did not earn enough money to receive Form 1099-MISC. All earnings as a freelancer are reported on Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax)...unless the IRS changes those plethora of tax forms again.

How Can You Ease the Pain of Tax Preparation? Tax Preparation Software!

Although filing taxes as a self-employed freelancer may seem scary, you do not have anything to fear. Simply report your nonemployee compensation with complete honesty. If the tax forms are too tedious to fill out, find inexpensive tax preparation software or an online software preparation program.

You can also file your tax return via E-File.

Additionally, you can hire a professional tax service to calculate your taxes. However, you will likely save money if you prepare your taxes yourself with the help of software. Plus, you can find tax preparation software designed to calculate all taxes with complete accuracy as long as you provide accurate information.

Important Things to Remember When Filing Taxes as a Freelancer

  • You will receive a 1099 form instead of a W-2 form.

  • You do not need to file Form 1099-MISC with the IRS.

  • You must provide the IRS with your nonemployee compensation as reported in Box 7 on Form 1099-MISC.

  • You must pay taxes on all compensation even if the amount is less than $600.

  • Include all earnings (gross receipts and sales) on Schedule C.

  • Use tax preparation software to prepare and file your taxes.

Need more in-depth support? No problem! Here are 7 tax tips for first-time freelance filers!

And last but not least...

STAY ORGANIZED...AND MOTIVATED!

Don't Wait Until the Last Moment to Prepare Those Taxes.

Prepare for the tax season by staying organized.

Prepare for filing taxes as a freelancer by paying estimated taxes during each quarter. The easiest way to pay estimated taxes is by using the online IRS Direct Pay option.

You can find the Direct Pay option by visiting the official IRS website.

First, you'll need to know your total tax from the previous year’s tax form.

Next, provide your routing and checking account numbers plus the amount you wish to pay. The IRS will withdraw the payment from your checking account. Check the option to receive an email notification. When it is time to file your taxes, remember to include the amount of money you already paid to the IRS via estimated payments. You can review your previous payments on the IRS Direct Pay website.

Plus, you can view your checking account statements to verify the amount of paid estimated taxes. If it turns out that you paid too much money, you will receive a tax refund.

You do not necessarily need to pay estimated taxes if you are also employed as an employee. In this case, simply tell your employer that you want to fill out a new Form W-4 for income tax withholding purposes. Fill in the appropriate section on the W-4 to have your employer withhold additional taxes from each paycheck.

How are Taxes Prepared and Filed in YOUR Country?

Remote Writers, sign in and leave a comment—or share your tax experiences in the Member's Only Forum.

Fred is a Contributing Writer for Remote Writers Work and Exclusive SME Author for GS Solutions. As a digital nomad, he's worked for various organizations as a freelancer and supports recruitment events for startups globally.

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